Disruptive Technology Hits Electric Industry

If you are reading this by electric light, you are connected to the electric grid Unless, that is, you are one of an infinitesimal number of home owners who installed solar panels.

The penetration of solar panels may be statistically insignificant today, but to the electric industry these panels, and other self-generating schemes, are like dry rot: a threat to the whole edifice.

It is not just those panels that are beginning to disrupt the electrical grid, but the whole panoply of alternative technology; wind, geothermal heat, micro-hydro turbines and scattered natural gas turbines all fit into a new category of electric generation known as “distributed generation.”

The change is so threatening to the investor-owned electric utilities and their not-for-profit colleagues in the public power sector that it has begun to dominate discussions on the Web and wherever utility executives gather.

Early this year the Edison Electric Institute (EEI), which represents the investor-owned utilities that provide 70 percent of U.S. electricity, issued a white paper discussing the disruptive changes that are beginning to threaten the old electric paradigm. The theme of change also dominated the EEI annual convention in San Francisco earlier this month, with CEOs talking about a “new business model,” although they were hard put to say what this will be.

The root cause of the problem is that the new entrants into generating treat the grid as kind of open marriage: there when it suits them. A home owner, might be self-sufficient in electricity, and even generate enough to sell a small portion back, to the grid 90 percent of the time; but during prolonged bad weather, or if the home system is down for maintenance, that home owner expects to flip a switch and go back on the grid. The local utility, all the while, has been standing by hoping to sell that home owner a few watts until the home system returns to power.

This applies even more so to large users of electricity, including factories and big retailers. Many of the factory customers generate nearly all of their own electricity already and big retailers are getting in the game. Walmart is covering its store roofs with solar cells. McDonalds has eyed self-generating for years, but not without the comforting assurance that the grid will always be there.

All of this distorts the financial as well as the physical infrastructure of the utility industry and produces social problems as well. Ted Craver, CEO of Edison International, the parent company of Southern California Edison, told the EEI conference that as California is “ground zero” for rooftop solar, you have to ask “are you creating a system of those who have means for self- generating and shifting the burden to the have-nots? It is a social fairness question.”

The system is also skewed, Craver noted, by subsidies for alternative generation. He called for a flexible system that allows for these new realities.

Another threat, according to Tom Fanning, CEO of the giant Southern Company, comes to the ability of utilities — one of the most capital-intensive industries is the world– to raise money. “Our industry raises about $90 billion a year and we need policies that support that,” he said.

There are other problems facing the electricity industry, which are cataloged in an amusing and readable book by economist Steven Mitnick, “Lines Down.” While Mitnick is more optimistic about the future of the grid than many, he says it needs fixing. It has been starved of investment and needs upgrading, particularly hardening against the storm outages that are standard in America but not in Europe, Japan and South Korea.

The future of the grid is not in the hands of the utilities alone, but also the regulators, federal and state, and politicians. That means that the new paradigm may be a long time in coming, while another aspect of the U.S. infrastructure deteriorates.— For the Hearst New York Times Syndicate

Comments

Perhaps it is time to put the "Public" back into Public Utilities. What is good for the investor-owned utilities is not always what is best for the communities served by these companies. Edison's principal operating company and wholly owned subsidiary, Southern California Edison (SCE), has a long history of problems when it comes to serving the public good, the most recent its fiasco repair problems at its nuclear power plant, San Onofre, in California. It has been accused of misleading regulators in its efforts to streamline the replacement of steam generators at its aging facility, and now has decided to close the facility due to the "continuing uncertainty" surrounding the failure of expensive replacement equipment that quickly failed, and the resulting delay as their management failures have been revealed. Nonetheless, California ratepayers have been paying for these failures and Edison wants them to pay even more.

SCE's pattern of misinformation and not telling the truth is not limited to San Onofre. Edison just agreed to a $37 million settlement with the California Public Utility Commission for the Malibu Canyon fire in 2007, finally admitting that it violated the law by not taking action to prevent the overloading of its pole by third-party telecommunications equipment. A report in January from the CPUC found that Southern California Edison violated safety rules, discarded evidence and used outdated crisis plans when responding to a 2011 windstorm in the San Gabriel Valley, east of Los Angeles. SCE has also dismissed the health concerns of another community, Chino Hills, concerned about the health risks associated with its plan to build high power 500 kv power lines as close as 40 feet from over 1000 homes. (Follow this link for more on this: http://youtu.be/574jWVvx4Sk). Perhaps investors need to make some changes in management instead of Edison's management resisting efficient distributed solar power generation on residential and commercial rooftops.

Perhaps it is time to put the "Public" back into Public Utilities. What is good for the investor-owned utilities is not always what is best for the communities served by these companies. Edison's principal operating company and wholly owned subsidiary, Southern California Edison (SCE), has a long history of problems when it comes to serving the public good, the most recent its fiasco repair problems at its nuclear power plant, San Onofre, in California. It has been accused of misleading regulators in its efforts to streamline the replacement of steam generators at its aging facility, and now has decided to close the facility due to the "continuing uncertainty" surrounding the failure of expensive replacement equipment that quickly failed, and the resulting delay as their management failures have been revealed. Nonetheless, California ratepayers have been paying for these failures and Edison wants them to pay even more.

SCE's pattern of misinformation and not telling the truth is not limited to San Onofre. Edison just agreed to a $37 million settlement with the California Public Utility Commission for the Malibu Canyon fire in 2007, finally admitting that it violated the law by not taking action to prevent the overloading of its pole by third-party telecommunications equipment. A report in January from the CPUC found that Southern California Edison violated safety rules, discarded evidence and used outdated crisis plans when responding to a 2011 windstorm in the San Gabriel Valley, east of Los Angeles. SCE has also dismissed the health concerns of another community, Chino Hills, concerned about the health risks associated with its plan to build high power 500 kv power lines as close as 40 feet from over 1000 homes. (Follow this link for more on this: http://youtu.be/574jWVvx4Sk). Perhaps investors need to make some changes in management instead of Edison's management resisting efficient distributed solar power generation on residential and commercial rooftops.

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